Annuity Factor Method

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Dictionary Says

Definition of 'Annuity Factor Method'

A calculation method to determine the amount of eligible withdrawals that an investor can make from their IRA without incurring penalties. The calculation uses life-expectancy data; however, it utilizes different data than is used in the amortization method.

Using the annuity factor method, a retirement-account holder would divide the current IRA account balance by an “annuity factor.” The annuity factor is calculated based on average mortality rates (using the mortality table in Appendix B of IRS Revenue Ruling 2002-62) and “reasonable” interest rates – up to 120% of the Mid-Term Applicable Federal Rate.
Investopedia Says

Investopedia explains 'Annuity Factor Method'

Using the annuity factor method, an investor can ensure that he or she does not lose account value to potentially costly penalties. It can also help an account holder determine how much money he or she may need to raise through other means (such as by securing a loan) in addition to withdrawing money from their retirement savings account to meet their current financial needs. 

Withdrawing money from a retirement plan should be a careful decision as it gives the account holder less time to recoup value and earn interest on plan assets.
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'Annuity Factor Method'

  • Substantially Equal Periodic Payment (SEPP): Learn The Rules

    http://www.investopedia.com/articles/retirement/02/112602.asp
    ... Annuitization Method Similar to the amortization method, the amount under this method
    is the ... The annuity factor is derived using an IRS-provided mortality table ...

  • Selecting The Payout On Your Annuity

    http://www.investopedia.com/articles/retirement/05/071105.asp
    ... Credit Quality Concerns A final factor to consider is the ... on the current value of
    your annuity with multiple ... on the best annuitization payout method to choose ...

  • CFA Level 1 Study Guide - Quantitative Methods - Time Value Of ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/time-value-money-applications-calculations.asp
    ... Statement; 6.20 Cash Flow Statement Basics; 6.21 Cash Flow Computations - Indirect
    Method; 6.22 Cash Flow Computations - Direct Method; ...

  • CFA Level 1 Study Guide - Quantitative Methods - Time Value Of ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/time-value-money-calculations.asp
    ... Statement; 6.20 Cash Flow Statement Basics; 6.21 Cash Flow Computations - Indirect
    Method; 6.22 Cash Flow Computations - Direct Method; ...

  • CFA Level 1 Study Guide - Quantitative Methods - Net Present Value ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/discounted-cash-flow-npv-irr.asp
    ... Statement; 6.20 Cash Flow Statement Basics; 6.21 Cash Flow Computations - Indirect
    Method; 6.22 Cash Flow Computations - Direct Method; ...

  • CFA Level 1 Study Guide - Quantitative Methods - What Is The Time ...

    http://www.investopedia.com/exam-guide/cfa-level-1/quantitative-methods/time-value-money.asp
    ... Statement; 6.20 Cash Flow Statement Basics; 6.21 Cash Flow Computations - Indirect
    Method; 6.22 Cash Flow Computations - Direct Method; ...

  • Personal Finance Videos | Investopedia

    http://www.investopedia.com/video/pf/
    ... Accrual accounting is an important method of measuring the ... Debt in an important factor
    to remember when analyzing a ... Learn how this annuity can provide you a ...

  • Personal Finance Videos | Investopedia

    http://www.investopedia.com/video/pf
    ... Accrual accounting is an important method of measuring the ... Debt in an important factor
    to remember when analyzing a ... Learn how this annuity can provide you a ...

  • Investing Videos | Investopedia

    http://www.investopedia.com/video/basics/
    ... Debt in an important factor to remember when analyzing ... Learn the method and reasoning
    behind this contradictory ... Learn how this annuity can provide you a steady ...

  • Investing Videos | Investopedia

    http://www.investopedia.com/video/basics
    ... Debt in an important factor to remember when analyzing ... Learn the method and reasoning
    behind this contradictory ... Learn how this annuity can provide you a steady ...

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